'Smart grid' is worth our investment

Tuesday, November 8th, 2011 10:00 PM

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State Sen. Don Harmon

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Last month, the Illinois General Assembly approved a revised legislative package that will result in a major and much-needed upgrade in our state's electric power distribution system. The legislation, referred to by supporters as the "smart grid bill" and derisively by opponents as the "Com Ed bill," has created some understandable controversy. I write to report what happened, how I voted, and why.

Last spring, the General Assembly had approved a single bill championed primarily by Com Ed (but supported also by progressive environmental groups like the Sierra Club, Environment Illinois and the Natural Resources Defense Council) that would have initiated the "smart grid" investment and advanced key environmental and energy-efficiency measures.

I voted against that bill and I applauded the Governor when he vetoed it. In my view, the initial bill lacked key consumer safeguards and did not adequately ensure that Com Ed would make our existing power distribution system more reliable. A long, stormy summer only emphasized for me that reliability was a critical concern.

Notwithstanding the flaws in the bill, I was always convinced that investing in "smart grid" technology was critical to the future of our state. Oak Park has been a pilot community for the smart grid, and Village President David Pope and the village board have been among the most outspoken and articulate supporters of the legislation. The board's recent resolution urging legislative action is one of the better summaries of all the good reasons to invest in "smart grid" technology. The question for me, therefore, was how would Illinois invest in the "smart grid" on the terms most favorable to Illinois citizens who pay for it through electric rates.

Coming into the fall, I became certain that Com Ed would convince enough legislators of the benefits of the "smart grid" to override the Governor's veto, with or without major consumer protections added to the bill. I volunteered to negotiate on behalf of the Senate Democratic Caucus a supplemental bill that would correct many of the fundamental flaws in the underlying bill. In doing so, I negotiated directly against Com Ed's interests, and secured key consumer protections. Even the Chicago Tribune, which rarely agrees with Springfield Democrats, came out strongly in favor of the legislative package.

Among the key protections in the supplemental bill are new performance standards that will hold Com Ed accountable for unreliable service, and stiff financial penalties if they fail to meet them; a reduction in the return Com Ed can earn, from historic highs of 10 or 11 percent to more reasonable projections in the range of 8 or 9 percent; financial penalties if Com Ed fails to create any of the 2,000 jobs it has promised to create directly; a commitment that the investment in "smart grid" technology will afford rate payers the opportunity to save much more than they have to pay; and a $60 million rate relief fund to protect our most vulnerable neighbors — low income families, seniors, disabled veterans, and active duty military personnel.

So what does this mean to you? It likely means that the distribution charges on your monthly bill will increase by $2-$3. Bear in mind that the distribution charges are a relatively small portion of your bill, compared to the cost of the electricity itself, and that the legislation prohibits your total bill from going up more than 2 1/2 percent.

In exchange, you should expect an opportunity to manage your power use and save some multiple of that amount in power charges, and you should expect a much more reliable grid, with fewer and considerably shorter power outages.

There are a couple of glaring misconceptions about the bill and Com Ed that warrant correcting, especially if you really want to understand why this legislative package makes sense.

First, Com Ed is no longer in the business of selling you electricity. Com Ed's business is delivering power to your home or business. If you choose not to procure your power elsewhere, Com Ed will purchase power for you and pass it along at cost. Com Ed does not profit from the price of electricity.

Second, Com Ed is not a traditional free-market, profit-earning company, but remains a regulated utility. Com Ed cannot charge you whatever it feels the market will bear and capture as much profit as it can. Instead, it spends money to operate, maintain or improve its power transmission and distribution network, and then comes to the rate payers, represented by the Illinois Commerce Commission, and asks for permission to recover from rate payers the money it has already spent, plus a reasonable return on its costs.

Nothing in the legislation changes that fundamental premise; some of the mechanics have been altered, and the rate of return has been lowered, but Com Ed is still limited to recovering the costs it invests directly in an improved and modernized power delivery system. There is no guaranteed profit in the bills; there is no annual rate increase codified in the bills. In fact, the rate of return authorized in the legislation is approximately 10 percent less than the national average.

Third, even without the legislation, Com Ed could have simply made the "smart grid" investment, sought approval from the Commerce Commission, and passed all of the costs along to us ratepayers. However, given the dramatic scale of the investment program, it was prudent to seek approval in advance, and it was prudent for the General Assembly to demand additional safeguards and ancillary commitments in exchange for essentially giving prior approval for the investment.

I invite anyone interested to visit www.donharmon.org for links to the Oak Park Village Board Resolution, the Sierra Club's statement in support of the bill, and the Chicago Tribune editorial in favor of it. I would be happy to discuss this matter further with anyone who would like to do so.

State Sen. Don Harmon represents the 39th District, which includes Oak Park and River Forest.